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Professional Liability Insurance Broker -
Know the Ropes

What does a Professional Liability Insurance Broker do?
A Professional Liability Insurance Broker acts on your behalf and searches the insurance market for competitively priced insurance products that will assist you with reducing your exposure to financial loss in the event of an accident or a claim against you. Some brokers specialize in providing consultant and contractor insurance services.

Do I need an Insurance Broker?
Not necessarily, but used carefully and selectively a broker can add significant value by substantially reducing the time that you need to devote personally to understanding the risks inherent to your independent consulting business and identifying appropriate insurance products to help you mitigate those risks.

How does a Professional Liability Insurance Broker get paid?
Typically the broker will earn commissions on Insurance products that you purchase. The broker should be willing to discuss with you the level of commission he will earn on each product.

Alternatively, some brokers will agree to work for a fixed fee which may be charged on an hourly or a daily basis. Some independent consultants prefer this model since it gives certainty as to the fee you are paying to the broker.

Getting value for money from your Broker
An Insurance Broker earns his commission or fee for providing a service for consultants and contractors. The service provided is likely to save you a significant amount of time and the insurance products that you ultimately decide to purchase are likely to be closely aligned with the needs of your consulting business.

Consultant and contractor insurance requirements can be complex and mistakes can be costly. In my experience investing some relatively modest expense upfront to ensure that your consulting business has the appropriate types and amounts of insurance cover is money well spent.

Periodically, perhaps once every three years, you should speak direct with a professional liability insurance company (an underwriter) to review the range of insurance products that you are using, the level of cover and the cost to give you some comfort that you are getting value for money from your broker.

Alternatively, every few years you could discuss your requirements with an alternative Professional Liability Insurance Broker, effectively putting your insurance business out to tender. You will then be able to compare the cover and premiums offered with those that are recommended by your existing broker.

This will keep your exiting broker on his toes and send a very clear message that he needs to regularly review your requirements and scan the insurance market for the most appropriate and competitively priced products on your behalf i.e. do what he is paid to do.

However, a word of caution. My experience time and again has been that there is tremendous value in building enduring relationships with professional advisers. It can be false economy to change horses every few years simply to save a few nickels and dimes.

The benefit of having a small and stable group of trusted professional advisers who know your business well should not be underestimated. It is also possible that longstanding advisers will reduce commissions and fees in order to acknowledge your loyalty.

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